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Sunday, February 25, 2007

Private Equity Investing for the Middle Class

A private equity fund is an investment pool that acquires majority stakes or entire ownership of companies in order to restructure its organization. The intent is to resell or go public with the company in a relatively short period of time. In the past, these funds have significantly outperformed the market. However the cost to get into these funds is extremely high, as much as $25 million. Even to invest in a fund of private equity funds, the minimums are high, ranging from $250,000 to $1,000,000.
Fortunately for the small investor, there is an Exchange Traded Fund [ETF] called PowerShares Listed Private Equity Portfolio (PSP) which trades on the American Stock Exchange and invests in over 30 publicly traded stocks with direct investments in more than 1,000 private businesses. This ETF provided the investor with liquidity and diversification, with no minimum investment. One of the downsides is its short track records; it has only been trading since October of last year.

Author does not own the above.

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